Performance Analysis of a Fluid Production/Inventory Model with State-dependence
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Abstract
We study the long-run average performance of a fluid production/ inventory model which alternates between ON periods and OFF periods. During ON periods of random lengths items are added continuously, at some state-dependent rate, to the inventory. During OFF periods the content decreases (again at some state-dependent rate) back to some basic level. We derive the pertinent reward functionals in closed form. For this analysis the steady-state distributions of the stock level process and its jump counterpart are required. In several examples we use the obtained explicit formulas to maximize the long-run average net revenue numerically.
Keywords
production/inventory model fluid model EOQ state-dependent production rate reward functionals stock-level process long-run average revenue maximizationAMS 2000 Subject Classification
Primary 90B05 90B30 Secondary 60K10Preview
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